United Technologies' $400 million tax deal wins Senate approval

Ken Dixon

Updated 12:27 am, Friday, April 25, 2014

A mock up of what Sikorsky Aircraft expects its S-97 Raider to look like. It is the new hybrid helicopter, the company is building after successful tests of an experimental aircraft that uses similar technology, the X2.
Photo: Steven Kaeter, ST

A mock up of what Sikorsky Aircraft expects its S-97 Raider to look...

HARTFORD -- A deal settled with Gov. Dannel P. Malloy's handshake in February was set to become law Thursday, after the Senate approved a bundle of enticements, opening up $400 million in tax credits in exchange for assurances that United Technologies and Sikorsky Aircraft remain in Connecticut.

The 14-year deal includes $500 million in new capital investments from UTC, which will erect several new buildings and plans about $4 billion in new research and other expenditures over the life of the agreement.

The lopsided 34-2 Senate vote belied some Republican senators who were critical of the state selecting UTC, with $6 billion in profits last year, at a time when high taxes are stressing the state's smaller businesses.

But with more than 15,000 employees, Hartford-based UTC is the state's largest private employer. Its Sikorsky division has a smaller, shorter-term deal, with $50 million in planned investments and a commitment to stay five years in its world headquarters on the banks of the Housatonic River in Stratford.

"Their R&D keeps us on the cutting edge so we can continue to save lives and put Connecticut's families at work," said Sen. Kevin C. Kelly, R-Stratford, adding that the shorter length of the agreement causes concern.

"So for five years, we're going to help the hardworking families of Connecticut that make these products that make us proud," he said. "But the problem is the economy of Connecticut is requiring us to do this and if we don't change course and set our state on a new road, we're going to stay in the same place we are currently, then what's going to happen to the families of Shelton, Stratford, Monroe, Seymour, Trumbull in five years?"

Malloy, in a statement after the two-and-half hour debate, hailed the bill's passage and its potential effect on 75,000 direct and indirect jobs for employees and subcontractors.

"This agreement will bolster the state's aerospace sector, encourage business growth and investment and, most importantly, foster the retention and creation of thousands of good-paying jobs with good benefits for Connecticut residents," Malloy, a Democrat, said. "UTC is the catalyst of this initiative, but the investments called for in this bill go well beyond one company. The agreement will have a direct impact on employment in almost every city and town in Connecticut, not just at the UTC companies, but also in the hundreds of aerospace supply chain companies throughout the state and the region."

"UTC is not only a builder of engines, but a builder of people," said Sen. Joseph J. Crisco Jr., D-Woodbridge.

"This is one of the great companies of the world," said Sen. Gary Lebeau, D-East Hartford, co-chairman of the Commerce Committee whose city is also the home of UTC's Pratt & Whitney aircraft engine divisions. "It is certainly one of the great companies of Connecticut and the United States."

Sen. L. Scott Frantz, R-Greenwich, a private banker who voted for the bill, wondered why the deal emerged at all.

"My dream is to just let Pratt & Whitney thrive in the country's best business environment," he said. "We continue to rank way too low in so many areas."

He cited the loss of 100,000 manufacturing jobs in the state since the 1980s. "It's a big deal, $400 million and I believe it's money well spent, given where we are." Frantz called the agreement "intelligent defense" for state jobs.

"It is indeed a little unusual for me to support this legislation," said Sen. Michael A. McLachlan, R-Danbury, who also voted for it. "I tend to be very reserved in offering businesses handouts. In my estimation this is exactly how government must proceed if we're going to grow business in the state." He noted at least 36 UTC subcontractors in Danbury and Bethel.

But Sen. Anthony Guglielmo, R-Stafford, who voted against the legislation, said even if the deal were fair, lawmakers should balk at helping prop up a company that had $6 billion in profits.

"I do have a problem picking winners and losers," he said of the bill. "It's the best of a lot of bad deals, but when you cut to the chase on it, it's still corporate welfare. If they don't create a single job they'll get 90 percent of that $400 million." He noted that back in 2010, UTC executives were quoted as saying "Anyplace" outside Connecticut would be better for business.

"It makes you wonder what their commitment is to Connecticut," Guglielmo recalled. "It makes me a little queasy when I think of giving $400 million to somebody who said Anyplace But Connecticut."

Sen. John McKinney, R-Fairfield, supported the bill but was concerned that the legislation was moving so soon after an announced 600 layoffs at Sikorsky.

"It was clearly under negotiations when Sikorsky lays off 600 people and we don't get the jobs back," McKinney said.

Still, the company is poised to invest in research at a time when they are preparing bids for both the Department of Defense and the presidential helicopter.

"I'm frustrated over the fact that if they get awarded those contracts there are no guarantees that Sikorsky is at full employment in five years," McKinney said. "If they get those contracts, the taxpayers ought to get their money back and the workers ought to be guaranteed their jobs for more than five years going forward."